CFPB Staff Evaluations Show Sharp Racial Disparities
The Consumer Financial Protection Bureau is shedding senior officials faster than it can replace them, raising concerns that the agency will no longer be able to maintain the aggressive pace set during its nearly two years of existence.June 13
WASHINGTON Since the Consumer Financial Protection Bureau burst onto the financial stage a few years ago, it has made a steady stream of controversial moves.
None are more despised by bankers than the agency's use of statistical differences in the loan terms offered to different ethnic groups to sue creditors for unintentional racial bias.
In an ironic twist, it turns out that the CFPB's own managers have shown distinctly different patterns in how they rate employees of different races, according to confidential agency data obtained by American Banker.
Specifically, CFPB managers show a pattern of ranking white employees distinctly better than minorities in performance reviews used to grant raises and issue bonuses. Overall, whites were twice as likely in 2013 to receive the agency's top grade than were African-American or Hispanic employees, the data shows.
What's more, those disparities are only one of many serious personnel problems plaguing the CFPB. Inside the agency, morale is poor and management has been accused in several cases of favoring Caucasian men and of creating a hostile work environment. That's according to interviews with a dozen current and former staffers across six departments, all of whom requested anonymity over concerns about retaliation.
Employees have filed 115 official grievances with the National Treasury Employees Union (NTEU) since last August, the CFPB says. If unofficial complaints that haven't yet worked their way through the system are included, the number exceeds 200, according to information obtained by American Banker.
Most of the complaints pertain to allegations of unequal pay and raise questions about the recent performance reviews.
The NTEU "has identified disparities in performance ratings that appear to negatively impact non-whites and females (to some degree)," the local union said in a January email to members, which was obtained by American Banker.
CFPB spokesman Sam Gilford says the agency is still analyzing the performance evaluation data and indicated that it's preliminary and could change "depending on the outcome of pending reviews and appeals."
"The CFPB is committed to fairness and equity in the workplace as well as the marketplace," Gilford said. "Just as we often remind lenders that strong compliance management systems are critical to ensure compliance with consumer protection laws, the bureau has taken a compliance management approach in monitoring and evaluating its own performance rating process."
The most concrete data available on the CFPB's employee evaluations relates to 2013. The agency rated its more than 1,100 staffers on a scale of 1 to 5 and grants greater benefits, including raises and bonuses, to those who receive higher scores.
White employees scored markedly higher than minorities. Overall, 74.6% of whites received ratings of 4 or 5, versus 65.5% of Asians, 65.2% of Hispanics and 57.6% of African-Americans, according to an internal CFPB report obtained by American Banker.
The discrepancies were even greater at the ratings range's extremes. At the top, one-fifth of white employees, or 20.7%, received a 5 and were dubbed "role models" compared with 10.5% of African-Americans and 9.1% of Hispanics.
In contrast, a relatively high proportion of minority employees received 3 ratings the lowest grade given out in large numbers. In total, a rating of 3 was given to 42.4% of African-Americans, 34.5% of Asians, 34.8% of Hispanics and 24.4% of Caucasians.
Breakdowns of employees who received 1 or 2 ratings were unavailable because they represented small slices of the agency's population likely a few dozen staff. Overall, the evaluations covered 778 white employees, 191 African-Americans, 110 Asians and 68 Hispanics. The data did not cover small groups identified as "two or more races" and "other race."
The statistics themselves do not prove that CFPB managers are discriminating intentionally against minority employees. Yet they do indicate that racial disparities can be just as easily identified within the CFPB's ranks as among the lenders the bureau regulates. The agency has pressed such claims under a controversial legal theory known as disparate impact the assertion that different results for different racial groups are themselves a type of wrongful bias, even if they are unintentional.
"The level of hypocrisy at this agency is shocking," said a current agency employee who spoke on condition of anonymity. "If it was a lender and had similar statistics, it would be written up, immediately referred to the Justice Department, sued and publicly shamed."
Added another agency employee, "If we're telling banks to own it [statistical evidence of racial bias], then why don't we own things too?"
The CFPB is likely to face pressure to answer that question as the figures circulate.
"In Washington, the hypocrisy side of this is the easiest storyline to write and the foes of the CFPB will use this as latest round of ammunition against the agency," says Edward Mills, a financial policy analyst at FBR Capital Markets. "This will certainly be something even the Democrats will have concerns about, because you don't want to lose support over personnel issues."
For its part, the bureau will likely move quickly to try to fix its personnel problems and move on, he added.
The CFPB's Gilford said the agency voluntarily collected performance evaluation data and hired an outside firm to assess it further.
"We hold ourselves to the standards of fairness that we expect of our regulated entities," he said. "That's why we have undertaken a robust compliance management approach to ensuring our internal policies result in the fair treatment of our employees. If our internal review finds problems, we will be proactive about taking corrective actions."
The performance review figures are all the more surprising given the way the CFPB has touted having more women and minorities within its ranks than other federal agencies do.
Approximately 47% of CFPB staffers are women, and 34% identify themselves as minorities, according to an agency report sent to Congress last year. That makes it more diverse than other federal regulators, where women represent 44% and minorities 29% of staff, according to the report.
Yet it's the CFPB's high expectations for others that make any racial disparities among its own staff that much more notable, observers said.
"The CFPB has advanced the perception that it rose from the ashes of the financial crisis and would operate unlike any other financial regulator in D.C. A 21st-century agency, as they put it," said Isaac Boltansky, a policy analyst at Compass Point Research and Trading. "This news highlights the fact that the CFPB has to face one of the core issues other regulators grapple with. Human capital is the most critical and complicated component of any regulatory agency."
Current and former CFPB employees say the racial disparities are, at least in part, reflective of a larger problem stalking the agency. Created as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the CFPB officially opened its doors in July 2011. Inside the agency the mood was initially upbeat, but lately it has been plagued by rapid turnover and significant morale issues, sources say.
"I've already had 10 CFPB employees consult with me, and more than a few of them retain me, and the agency's only two and a half years old. It's remarkable," says David H. Shapiro, a partner at the Washington law firm Swick & Shapiro, who represents federal employees in Equal Employment Opportunity cases.
The current and former employees who agreed to discuss the agency shared their personal struggles there, many centered around "hostile" managers and cronyism. The CFPB said that it is addressing grievances through the official process.
However, the sheer number of grievances filed and current and former employees willing to speak about such issues is telling.
"There may be truth on both sides of these things, but the main truth about the agency is there is something very wrong going on because management simply cannot have this many complaints so early" in its existence, Shapiro says.
Many such claims are now working their way through a mandatory Equal Employment Opportunity Commission regulatory process before they can be brought as lawsuits. Such suits are "going to be a big deal for the CFPB and the public in the not-too-distant future," Shapiro adds.
Even staffers who were treated well say some employees were asked to do too much, too fast and suffered from burnout. Among the offices with the highest attrition rates, annual turnover has been running at roughly 40%, at least in one case, sources say. The CFPB said its overall attrition rate is 9.5%, in line with that of other federal regulators.
"People don't stay for the long term and that's a product of treatment of the employees," says a former employee. "As a startup agency, you would expect an atmosphere that encourages collaboration, professional development and upward career mobility. Instead, you quickly find inequities in the treatment of employees and the division of work assignments. The level of nitpicking and downright bullying by management is unparalleled. When employees raise these concerns, they are retaliated against."
The departures reach far up the ranks. Roughly a dozen key senior officials left the agency within a short period, fueling concerns about continuity and burnout, American Banker reported last June. Many employees talk of having two to four bosses during their short tenures at the agency.
Despite the turnover, however, the agency continues to grow. It had 970 employees as of Sept. 22, 2012, and 1,302 by the same point in 2013, according to reports to Congress.
The CFPB "has grown at a rocket pace," Compass Point's Boltansky says. "At the same time, they've lost some big names," which could account for some of the disarray and discontent, he added.
A number of employees say they feel senior agency officials have shown more interest in hiring outsiders than in promoting from within. Another common complaint: promises of raises and bonus that were never granted. The CFPB says that more than 20% of its newly filled positions are selected from staff already at the agency.
Negative feelings appear widespread with the CFPB's ranks, according to a confidential annual employee survey obtained by American Banker. Only 36% of employees said they were satisfied with the opportunities to get better jobs within the agency among roughly 1,000 employees surveyed. Just over half of employees (51%) agreed that they "have a feeling of personal empowerment with respect to the work process"; nearly 29% disagreed with that statement, and the remainder were neutral. Those figures show a lower level of satisfaction than is typical in the private-sector average but in line with 2012 government-sector surveys.
"Retention matters because it makes work more efficient and it makes industry and other stakeholders feel more confident in the agency's actions," said a second former employee. "If the bureau does continue to lose people, then its reputation will suffer."
Some of the CFPB's personnel problems appear to date back to its inception. The agency drew many of its employees from other banking and securities regulators. Others came from the private sector.
The result was that pay differences were substantial, even among employees with similar backgrounds in part because some federal transfers remained unaware that salaries were negotiable. The CFPB is working to fix some of the pay inequalities.
"We are working with CFPB to improve the appraisal process, among other issues, at the bargaining table and we have had productive discussions," Colleen Kelley, the NTEU's national president, wrote in an email to American Banker. "Meanwhile, a number of employees have voiced dissatisfaction with their appraisals through the interim negotiated grievance procedure and we are working with CFPB to resolve those disputes."
The CFPB has also shown a cooperative attitude in working with the union, she added.
Even so, new concerns are popping up, and some employees say agency management is too quick to dismiss complaints.
"There's a sense that employees are expendable," said the first current employee. "The CFPB is constantly rehiring and retraining new employees, further escalating costs and lowering morale."
One flashpoint arrived for the CFPB after its employees unionized last year. That's when complaints began to surface charging agency managers with handing out low performance evaluations based on the "micromanaging" of workers or observations about their "emotional state" rather than their productivity.
"In my whole career in federal government, I have never received an evaluation like I did that was more or less [based] on the personal aspect instead of on the performance," said a third current employee. "My manager has embarrassed me in front of team meetings and often talks condescending to staff. I'm sure even more people have considered filing complaints but are scared of what could happen."
Several employees expressed fears that management "retaliates" against employees who file complaints. Some say that after they voiced concerns, their performance ratings were lowered, preventing them from receiving raises or promotions.
Others said human resources failed for months to respond to their formal complaints or referred them back to the managers involved.
"When managers are not dealt with, they are just emboldened," said the first current employee. "There is bullying."
The CFPB said that it has entered into an agreement with the NTEU on how grievances are addressed. Complaints are initially referred back to an employee's manager to resolve. If they cannot do so, an impartial arbitrator not employed by CFPB makes a ruling.
Employees give the agency credit for addressing some employee complaints. It has, for example, resolved concerns involving out-of-pocket travel expenses. However the prevailing sentiment among the dozen employees and former staffers who agreed to talk is that the CFPB's senior staff still lacks necessary checks and balances.
"I joined this agency because I wanted to do good and help the community, but it didn't turn out that way, and now people are just trying to save their hides," says the third employee. "Yeah, it's a new agency and will have some growing pains, but they [supervisors] do what they want, and I do think they need to have someone watching over them."